Securities and Exchange Commission Investor Advisory Committee

Minutes of the Meeting on January 21, 2016

The Investor Advisory Committee (IAC) met on January 21, 2016, in a public meeting at the Securities and Exchange Commission’s headquarters in Washington, D.C.  The meeting convened at approximately 10:00 a.m. and was broadcast live by webcast.

The following persons attended the meeting:

Commissioners of the Securities and Exchange Commission

  • Chair Mary Jo White (morning session only)
  • Commissioner Kara Stein
  • Commissioner Michael Piwowar (morning session only)

Advisory Committee Members[1]

Kurt Schacht, Chairman
Anne Sheehan, Vice Chairman
J. Robert Brown, Jr., Secretary
Darcy Bradbury
Joseph V. Carcello
Rick Fleming
Matthew Furman
Roger Ganser (by telephone)
James Glassman (by telephone)
Craig Goettsch
Stephen Holmes
Adam M. Kanzer (by telephone)
Roy Katzovicz
William D. Lee
Barbara Roper (by telephone)
Damon Silvers
Steven Wallman
Susan Wyderko


Opening Remarks

Chairman Kurt Schacht opened the meeting by welcoming Susan Wyderko as the Committee’s newest member.  Chair White provided an update on the Commission’s activities in recent months. Commissioner Piwowar emphasized the importance of fixed income market structure and transparency.  Commissioner Stein advocated for an investor-centric approach to FASB’s proposals on materiality.  She also noted the work of the SEC Investor Advocate in drawing attention to rule proposals from the exchanges to amend their listing requirements.

Oct. 15, 2015, Meeting Minutes Approval

After a motion was made and seconded, the Committee voted to approve the minutes of its previous public meeting on Oct. 15, 2015.  Susan Wyderko abstained from the vote, explaining that she had not been a member of the Committee at the time of the previous meeting.

Discussion of Recent Bond Market Structure

Mr. Schacht introduced two panelists: 
  • Larry Harris, Fred V. Keenan Chair in Finance, and Professor of Finance and Business Economics, Marshall School of Business, University of Southern California
  • Craig A. Noble, Managing Director and Head of Capital Markets Trading, Wells Fargo Advisors
Mr. Harris described his research in corporate bond trading, which he said demonstrated high markups and instances of trade-through pricing.  He suggested launching a pilot study in which the 200 most liquid bonds would be traded with the same order handling rules as in the equity market.  Mr. Noble highlighted the distinctions between equity and bond markets, with the latter characterized by much a greater number of CUSIPs coupled with low trading frequency.  He advocated allowing market dynamics to drive the market, rather than imposing a top-down regulatory directive.  A discussion with Committee members followed.

Consideration of Draft Letter to FASB regarding Materiality

Mr. Katzovicz presented a draft comment letter to the Financial Accounting Standards Board (FASB).  The letter urged rejection of proposed changes to concepts of “materiality” embodied in FASB’s Conceptual Framework for Financial Reporting and FASB’s guidance on Notes to Financial Statements.  The letter urged FASB to reconsider and, if appropriate, re-propose amendments that would better accomplish its stated goals. 
A discussion ensued on FASB’s dual proposals.  Members also discussed whether it was appropriate for the Committee to issue a letter to FASB. 
Mr. Ganser moved to approve the letter, and Mr. Katzovicz seconded the motion.  The Committee approved the motion, with Mr. Fleming and Ms. Wyderko abstaining.


The Committee went into recess at 12:30 p.m. for lunch and non-public subcommittee meetings.


The public meeting resumed at 2 p.m. 

Update on Crowdfunding Rules

Mr. Schacht introduced the three panelists: 
  • Sara Hanks, Co-founder and CEO of CrowdCheck
  • Judith Shaw, Securities Administrator, State of Maine, and President, North American Securities Administrators Association (NASAA), and
  • Chris Tyrrell, Chairman, CrowdFund Intermediary Regulatory Advocates
The panelists expressed their views about the potential benefits and risks of crowdfunding and the anticipated utilization of this new capital formation tool.  In their remarks, the speakers emphasized the need to educate investors as well as issuers. Investor protection, Mr. Tyrrell observed, was in the economic interests of the crowdfunding industry. A discussion with Committee members ensued.

Discussion of NASDAQ Listing Standards—Shareholder Approval Rules

Mr. Brown introduced two panelists from The Nasdaq Stock Market:
  • Stanley Higgins, Senior Director, Listing Qualifications
  • Arnold P. Golub, Vice President, Listing Qualifications, and Deputy General Counsel
The panelists described Nasdaq’s current solicitation of comments on its shareholder approval rules. The speakers emphasized that Nasdaq was not proposing any specific changes, but rather was asking whether changes were needed to the current rules, which have been in place since 1990.  Following their opening remarks, a discussion with the Committee ensued, with several members expressing opposition to any material relaxation of the shareholder approval rules.


The meeting was adjourned at 4:08 p.m.
[1]  Lisa M. Fairfax, Joseph Grundfest, Hester Peirce and Jean Setzfand were absent.